Policy —

Fiber fail? Hong Kong booms as Verizon retrenches

Fiber rollouts in Hong Kong are going great guns while Verizon seems intent on …

Those anxious for a taste of fiber in the form of Verizon's FiOS service may be in for a long wait. Broadband Reports has been collecting various indications that the networking giant is having trouble reaching its goals for the first round of its fiber rollout, and has no plans to expand beyond its existing footprint until it can increase the uptake where it's already available. But Verizon's apparent problems stand in sharp contrast to news from Hong Kong, where a company that offers twice the speed of FiOS at a fraction of the price has seen booming sales of its service.

(Full disclosure: I'm an existing Verizon DSL customer that has been experiencing a frustrating wait for FiOS service to become available in my area.)

Hong Kong Broadband Network announced the initial results of its "Awesome Speed. For Everyone." sales, which offer a symmetric 100Mbps fiber connection for the hefty price of US$13 a month. In the two months it has been offering it, customer growth has tripled compared to the earlier months of 2009. Clearly, the company has found it relatively easy to roll out or purchase fiber in Hong Kong's dense urban environment, and is attempting to recoup its investment in infrastructure by attracting lots of people to its service using low prices.

To get half that download speed (and one-fifth the upload) with Verizon costs $140 a month, assuming you bundle it with local phone service. It also requires a one-year commitment, and Verizon has recently raised the early termination fees so that anyone quitting ahead of that year will now owe the company $360. These would suggest that the company plans on recouping its costs through fewer customers that pay far more.

But that's certainly not how Verizon executives are viewing matters; the company's CEO apparently told investors that it plans on getting 40 percent of the people within FiOS service areas to sign up. And, instead of benefitting from the lower infrastructure costs of deploying to dense urban environments, the company is apparently struggling to get service into multiunit dwellings. In fact, its general inability to deploy FiOS in the most densely populated areas of its home turf, New York City, suggests that the traditional excuse for the stagnant broadband market in the US—its diffuse population—simply doesn't hold water.

Most of the problems appear to be cultural. The company obviously wants to extract as much money as it can from its infrastructure investments, so it seems to hold off on pushing the service until it can arrange to offer TV service at the same time. There's also a legacy of apartment towers that have made exclusive arrangements with cable companies that needs to be overcome.

But it's hard to shake the sense that Verizon is shooting itself in the foot. With a minimum investment of $55 dollars a month for service that's on par with many cable offerings, FiOS represents a big expense at a time where most in the US are watching their money carefully. And, even within the company's fiber footprint, service availability is extremely erratic. The company advertises heavily here in New York City, but it almost feels like taunting, given that neither of my two recent dwellings had service (one in Queens, a multiunit high-rise in an area of single-family dwellings; the other in a Brooklyn neighborhood dominated by three- and four-story brownstones).

Meanwhile, the company is also beginning to drop hints that, unless it can bring up subscriber rates in the areas that have service, it's not going to bother expanding beyond them.

The company has had no problems racking up profits despite the infrastructure investments needed to provide fiber, so it could easily cut prices or expand service if competition forced it to. But, because of the lack of competition in the US market, the chances of anyone seeing service of the sort that Hong Kong now receives are extremely remote.